Drahi Prepares for Bigger M&A Deals With New Dutch Entity

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Patrick Drahi, rebuffed this week in his $11 billion bid for French wireless carrier Bouygues Telecom, will convert his cable holding company into a new entity to gain a new stock for bigger takeovers.

Altice SA will be replaced by a new Dutch company called Altice NV valued at almost 62 billion euros ($69 billion) including debt. For each Altice SA share, holders will get three Class A shares with 1 voting right each and one Class B share with 25 voting rights, the company said Friday.

“We want to be prepared to do potentially larger transactions and be able to finance them in the appropriate long-term way,” Altice Chief Executive Officer Dexter Goei told reporters in Amsterdam.

Since its 2014 initial public offering, Altice has become one of Europe’s most acquisitive telecommunications companies. Under the new structure, it could issue as much as 50 billion euros in equity while still allowing Drahi to keep control of the company he founded, Goei said. Drahi, 51, currently holds about 58 percent.

Among potential takeover targets for Drahi in Europe is Dutch carrier Royal KPN NV, people familiar with the matter have said. In an interview with Telegraaf, Goei said KPN is on Altice’s internal list of five desired European targets.

Dutch Acquisition?

“An acquisition doesn’t have to take place today, tomorrow or this year. Our approach is always non-hostile and we’re not in talks now,” Goei said of KPN. “We’re capable of investing more in Dutch network annually than KPN does.”

The Belgian government may sell its stake in the country’s biggest carrier, Proximus, formerly called Belgacom.

Proximus shares rose 0.6 percent to 32.77 euros at 4:43 p.m. in Brussels. KPN added 0.9 percent to 3.47 euros in Amsterdam. Altice rose 0.3 percent to 131.60 euros, valuing the company at 32.6 billion euros.

Drahi, whose cable and phone empire stretches from Israel to France and the Caribbean, used Altice to make takeover bids for French carrier SFR and Portugal’s largest phone company. Altice is also the controlling shareholder in Numericable-SFR SAS, the French cable and wireless company Drahi used to bid for Bouygues Telecom this month.

Altice will keep a focus on U.S. expansion, as companies there are less expensive than European carriers and show real revenue growth, the CEO said. Altice agreed to acquire control of Suddenlink Communications of the U.S. last month in a deal valuing the target at $9.1 billion.

Stock Vs Cash

Goei said last month that everything in the U.S. “below Comcast effectively is in consolidation mode.” Smaller cable operators in the U.S. include Cox Communications Inc., MediaCom Communications Corp. and Cablevision Systems Corp.

Altice could also pick up any assets that Time Warner Cable Inc. and Charter Communications Inc. may have to sell to alleviate regulatory concerns, people familiar with the matter have said.

Altice so far has taken on about 24 billion euros in net debt to finance deals. As interest rates show signs of rising for the first time in about 10 years, European companies including Altice may turn to financing takeovers with equity instead of calling on lenders.

The re-incorporation requires approval by at least two-thirds of the votes cast at a meeting where at least half of the share capital of Altice is represented. The meeting will be convened in the first week of July, Altice said. Shareholders holding about 64.6 percent have agreed to vote in favor of the plan.

In the coming weeks the company will be looking for new office space in Amsterdam, Goei said, with five to 10 people moving from the office in Luxembourg to Amsterdam.